Efficiency Analysis of Microfinance Institutions in ASEAN: A DEA Approach

Izah Tahir, Siti Nurzahira, Che Tahrim
2013 Business Management Dynamics   unpublished
There are very limited studies in the efficiency of microfinance institutions (MFIs) in the Association of Southeast Asian Nations (ASEAN) countries. To the best of our knowledge, there is no research done to compare the efficiency of MFIs in ASEAN countries using Data Envelopment Analysis. Hence, the study on efficiency in this region is significant and will contribute to the existing literatures. The purpose of this paper is to examine and compare the efficiency levels of MFIs in five
more » ... FIs in five countries in ASEAN. These countries are Indonesia, the Philippines, Vietnam, Cambodia and Laos. Data Envelopment Analysis with the production approach is employed in this study. The period covers from 2008 to 2010. The results suggest that microfinance institutions in Vietnam are relatively more efficient that their counterparts with efficiency levels of 87.6% in 2008 and 2009, 90.8%in 2010 and 91.3%in 2011. Microfinance institutions in Laos are found to be least efficient (45% in 2008, 43.8%in 2009, 60.8% in 2010 and 62.5% in 2011). Further the results suggest that during the period of study we found that pure technical efficiency is lower than the degree of scale efficiency for Indonesia, Cambodia, Philippines and Vietnam, implying that that during the period of study, the microfinance institutions have been inefficient in controlling their costs rather than operating at the wrong scale. In contrast, in Laos, pure technical efficiency is higher than scale efficiency indicating that microfinance institutions in Laos are operating at the wrong scale of operation rather than producing below the production frontier. The results imply that improvements are suggested especially in reducing excessive usage of inputs.